General Electric (GE) is a conglomerate that just might beat the market. The recent earnings report beat consensus estimates and the market is taking notice. GE has finally decided to get back to its roots and lighten up on its capital financing efforts and redirect those assets back into manufacturing just as recovery brightens the horizon. In the past month the stock has turned around as is evidenced in this hourly trading chart provided by Barchart:
During the past year the market, as measured by the Value Line Index, is down around 2% but GE managed to gain about 4%:
General Electric Company operates as a technology and financial services company worldwide. The company's Energy Infrastructure segment offers wind turbines, gas and steam turbines and generators, integrated gasification combined cycle systems, aircraft engine derivatives, nuclear reactors, fuel and support services, oil and gas extraction and mining motors and control systems, aftermarket services, water treatment solutions, power conversion infrastructure technology and services, and integrated electrical equipment and systems. This segment also provides surface and sub-sea drilling and production systems, equipment for floating production platforms, compressors, turbines, turboexpanders, high pressure reactors, and industrial power generation and auxiliary equipment, as well as pipeline integrity, measurement, inspection, monitoring, and radiation measurement solutions to the oil and gas industry.
Its Aviation segment offers jet engines, turboprop and turbo shaft engines, related replacement parts, and aerospace systems and equipment for use in military and commercial aircraft; and maintenance, component repair, and overhaul services. The company's Healthcare segment provides medical imaging and information technologies, medical diagnostics, patient monitoring systems, disease research, drug discovery, biopharmaceutical manufacturing technologies, and remote diagnostic and repair services. Its Transportation segment provides drive technology solutions to various industries, including railroad, transit, mining, oil and gas, power generation, and marine.
The company's Home and Business Solutions segment provides home appliances, lighting products, and plant automation, hardware, software, and embedded computing systems. Its GE Capital segment offers commercial loans and leases, fleet management, financial programs, home loans, credit cards, personal loans, and other financial services. The company was founded in 1892 and is headquartered in Fairfield, Connecticut. (Yahoo Finance profile)
Factors to consider:
Barchart technical indicators:
- A reversal of sell signals can signal a buying opportunity in a stock that has good long term fundamentals
- 16% Barchart technical buy signal and getting stronger
- Trend Spotter sell signal but the signal is weakening
- Above its 20, 50 and 100 day moving averages
- 7 new highs and up 1.95% in the last 20 trading session
- Relative Strength Index 56.07%
- Barchart computes a technical support level at 18.77
- Recently traded at 19.77 with a 50 day moving average of 19.20
Fundamenatal factors:
- The company has clearly announced a refocus of its assets from capital financing back to industrial efforts especially in the production of energy and jet engines. The turbines of both segments are world class.
- Wall Street is following the stock and 14 brokerage firms have assigned 17 analysts to make recommendations
- Analysts project revenue will increase by 1.80% this year and another 5.30% next year
- The real story is in earnings estimates which are expected to increase by 13.10% this year. followed by 13.50% next year and continue to increase annually by 12.67% over the next 5 years
- These numbers resulted in analysts issuing 4 strong buy, 10 buy, 3 hold and no under perform or sell recommendations to clients
- If the numbers hold analysts predict investors could see a 15% - 17% total annual return over the next 5 years
- The company has a B++ financial strength rating
- The 13.87 P/E is below the market P/E of 14.00
- The dividend rate of 3.58% is about 45% of expected earnings and above the market dividend rate of 2.50%
- As stated before the company will trim its capital financing efforts and refocus assets back to manufacturing
Investor interest:
- This is a highly followed stock by readers of Motley Fool where 16,487 have given a opinion on this issue
- 94% think the stock will beat the market
- 94% of the more experienced All Stars also vote for the same result
- Most articles on the stock are positive and it is still favored by Goldman Sachs, Oppenheimer and Barclays Capital
Always look to the market for advice and here GE is outpacing other conglomerates. GE was up 4% in the past year while Siemens (SI) was down 38%, United Technologies (UTX) down 10% and even 3M (MMM) was also down 7%:
Summary: General Electric should reward patient investors with a fair annual total return. As the company reorganizes and lowers its capital financing exposure you might want to consider putting this one in you IRA and put it on a dividend reinvestment program. As always never buy and forget: be mindful of the 14 day turtle channel and the 50 and 100 day moving averages:
